Mideast likely to buck luxury sales recession

LUXURY ITEMS: Retailers such as Prada could be hit globally in 2009, according to a new report, but the Middle East will still see growth. (Getty Images)

The worldwide luxury goods market, once thought immune to the ebbs and flows of economic fluctuations, is likely to enter a recession in 2009, according to the results of the 7th edition of Bain & Company’s Luxury Goods Worldwide Market Study.

But the Middle East region is expected to buck the downward trend and is predicted to show 15 percent growth over next five years. The report reveals that $4.6 billion was spent on luxury goods in the region in 2007.

India and Russia are other markets expected to show strong growth in the next five years while the slowdown hits more mature markets such as Europe, Japan and the US.

Globally, the study found that the growth of luxury goods sales will slow sharply, to three percent in 2008, compared to nine percent growth in 2006 and the six and a half percent growth last year.

Turning to 2009, the report said luxury faces its first recession in six years, as exchange rate fluctuations and economic turbulence eat into the confidence of many luxury consumers in mature markets.

The study predicts as much as a seven percent decline in global luxury sales for 2009 using constant exchange rates.

"The impact of the financial crisis will bring some sectors into a recession," said Claudia D'Arpizio, a Bain partner based in Milan and lead author of the study.

“How much and how long depends in part on how companies react. The most resilient will be those with strong international and diversified brands.

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